When to spread trade

Written by Editor Tuesday, 13 July 2010 14:28

GFT, the forex spread trading providers, give some valuable insight into when the best time to play the forex markets is:

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One of the greatest benefits of the forex market is that it is open 24 hours a day, 5 days a week.

The ability to trade whenever you want can be a great advantage as long as traders realize that certain times of day are more suitable for trading than others. 

In order to devise an effective and time-efficient trading strategy, it is important to be aware of how much market activity occurs during different times in order to maximize the number of trading opportunities during those market hours.

Even though there is no official open and close in the forex market during the week, it can be broken up into 3 major trading sessions – Tokyo, London and New York.

The Tokyo trading session is the first to open, followed by London and New York.

Below are the unofficial open and closes for each session.

• Tokyo Session: 00:00 – 9:00 GMT

 

• London Session:  7:00 – 17:00 GMT

 

• New York Session: 13:00 - 22:00 GMT

 

When to Trade Based Upon Your Volume and Activity

The best time to trade is when markets or trading sessions overlap because there are more participants, which means more volume and momentum to fuel trends and breakouts.

This also tends to be when economic data is released, providing the triggers for the movements in currencies.

• European and US Overlap: 13:00 – 17:00 GMT

The forex market is the most active when the world’s two largest trading centers overlap. Approximately 70 percent of the total average range that a currency pair fluctuates in usually occurs during the European trading hours and 80 percent of the total average range of trading usually occurs during U.S. Trading hours.

Just these percentages alone tell day traders that if they cannot sit at the screen all day, the best time to trade is the U.S. and European overlap which is between 13:00 and 17:00 GMT.

• Asian and European Overlap: 7:00–9:00 GMT

The next best time period to trade is during the Tokyo and European Session overlap when both Asian and European traders have the opportunity to respond to European economic data. The London open can also be particularly volatile as European traders react to overnight developments.

When to Trade Based Upon Your Trading Style

The optimal time to trade can also depend upon the trading style. For example, momentum, trends and breakout trading strategies usually work better during active and liquid market hours while range trading usually works best during “off hours.”

·         Range trading – For forex traders that like to buy trade ranges during the course of the day, the best time to trade is usually between different trading sessions, a hour or so before economic data is released or the lull before the market closes.